On August 10 and August 16, 2016, the SEC brought two separate enforcement actions against companies for stifling whistleblowers through the confidentiality provisions in their severance agreements. The two companies, BlueLinx and Health Net, Inc. both paid significant civil monetary penalties to settle the charges. They also agreed to contact former employees who entered into severance agreements after August 12, 2011 to notify them of the order that the companies would not prevent them from contacting nor providing information to the Commission staff without notice to the companies and that they may accept a whistleblower award from the Commission.
Companies should:
Review their agreements and practices to ascertain that they do not prevent or restrict the ability of their employees to report possible securities or other federal law violations to the SEC or other government agencies and to collect whistleblower awards.
Offending Provisions Companies Should Avoid:
- Do not require departing employees to notify the company’s legal department prior to disclosing any financial or business information to third parties without expressly exempting the Commission from the scope of this restriction
- Do not require departing employees to forgo monetary recovery in connection with providing information to the Commission.
If you have any questions about your obligations as an employer, please contact us at info@mitzelgroup.com or reach out to your Mitzel Group, LLP attorney directly.
